Basic study about charts and indicators

Charts
&
Indicators

introduction

how to read charts

Charts are the recorded history of price and volume changes which helps in determining whether the investors/traders are buying or selling the stocks, but an experienced trader/investor could determine much more details from reading the charts. Subtle changes in the price and volume actions can tell many things such as:


  • The behaviour of the trend and charts.
  • Is market favouring the institutional investors.
  • When to enter and exit in a price movement.

Line chart

A line chart is a graphical representation of a stock’s  historical price and volume actions which forms a continues line by connecting the data points. Line graphs are the most basic type of charts which has been used in the financial and other sectors. Line graphs can be used to represent all time frames datas, but mainly used in day to day price changes.


  • Line graphs are visual representation of a stocks historical price changes in a single continuous line.
  • A line chart is easy to understand and simple in form, representing only changes in an asset’s closing price over time.
  • Because of its simplicity,traders tends to form patterns or trends from the line graphs.

 

line graph

Point & Figure Chart

A point-and-figure chart plot price movements of stocks, bonds, futures and commodities without taking into consideration about the time passing.

Point-and-figure chart doesn’t plot charts like all the other charts like candlesticks which mark the movement of a stock over a set of time period, but point-and-figure charts consist of stacked Xs or Os, each of them represent a set amount of price movement. 
The Xs represent rising price and Os represent falling price.

  • Screen unwanted movements and noises
  • Focus on important price movements and remove time aspect from analysis process.
  • Automatic trend lines and easy identifiable supports and resistance
point and figure

Bar Charts

Bar chart shows multiple price bars over time. Each bar shows how prices moves over a specific period of time. Bar chart shows the open, high, low and close(OHLC) prices over the time period. Daily bar chart shows price bar for each day. We can adjust the OHLC to show just the high, low and close (HLC). Trading decisions are made using bar charts, candlesticks by the traders.

  • Shows the open, high , low and close prices for a specific period of time.
  • High and low is represented using vertical lines
  • Left horizontal line represents the open, however right horizontal line represents the close.
bar chart

Candlesticks

Candlesticks are the combination of line-chart and bar-charts. Each candle’s body represent the day open, close, high, low of the day or the time frame in which it represents. Being a information packed candle they are used for trading patterns over short period of time like intraday tradings, over a few days trading sessions.  Candlestick are designed to makes them easy to read and interpret.

 

  • Candlestick are used by traders to predict the future movements using past performance.
  • Many algorithms are based on the candlestick patterns and charts.
  • Candlesticks can be used to determine the market emotions.
candlestick

Heikin-Ashi

Heikin-Ashi is the better Candlestick and it means “average bar”. Heikin-Ashi is used in conjunction with candlestick charts to know the market trends and predict future trends. There is a tendency with Heikin-Ashi to stay red during downtrend and green during an uptrend. It has a smoother look as it is taking the average of the movement.

  • Heikin-Ashi is used to predict the next movement of the candle.
  • Unnecessary reversal movements in the trend will not affect the traders.
  • Traders can continue in the trade until the average of the candles are changed.
heikin-ashi

Indicators

technical indicators

Technical indicators are used to forecast the movement 

MAcd

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Details

Moving Average Convergence/Divergence
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Moving Averages

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Supertrend

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Arron UP

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ADX

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Bollinger Bands

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